Kazaa partner pays up

Piracy settlement costs peer-to-peer application millions

Sharman Networks, partner company of the formerly dominant peer-to-peer application Kazaa, has reached a global settlement with the entertainment biz that will see it pay record companies $115 million and movie studios an unspecified amount estimated in the low tens of millions, and attempt to turn itself into a legit content distributor.

Australia-based Sharman has been a prime target of the music and movie industries ever since the U.S. Supreme Court’s 2005 Grokster ruling, which essentially outlawed peer-to-peer applications without antipiracy filters. A subsequent ruling in Australia also went against Sharman.

Under the agreement, Sharman will implement software filters in an attempt to keep out pirated content. It also intends to enter licensing deals to legally sell music, TV shows and movies.

Several other P2P companies, most notably Grokster, have reached similar settlements in the past year, with plans to relaunch as legal content providers; so far, none has successfully done so.

In the meantime, piracy has continued largely unabated as downloaders have switched to applications that use the BitTorrent protocol, which isn’t operated by a single company that can be sued and shut down.

The market for legal downloads from providers such as iTunes and Movielink has been growing rapidly, though, as studios and labels try to create more alternatives to piracy.

“This is welcome news for the music community and the legal online music marketplace,” Recording Industry Assn. of America topper Mitch Bainwol said in a statement. “Steadily but surely, we are passing another important marker on the remarkable journey that is the continuing transformation and development of the digital marketplace.”

Once adamant that they were not doing anything illegal, P2P industryites are hailing settlements like Kazaa’s and Grokster’s. “This settlement marks the dawn of a new age of cooperation between P2P technology and content industries, which will promise an exciting future for online distribution in general and Kazaa users in particular,” Nikki Hemming, CEO of Sharman Networks, said in a statement.